5 ways to avail different forms of credit card EMI options
The repayment tenure of credit card EMI conversion can range between 3-60 months basis the EMI type opted for; card users can easily repay their dues in smaller tranches at a lower cost depending on their repayment capacity.
Credit cards provide instant access to credit by financing your credit card transactions till the time you repay them. While card issuers do not charge any interest on transactions repaid by the due date, those repaid after the due date incur high-interest rates and fees. You should always pay credit card bills on time and credit card debt of any sort can impair your financial future. However if you are unable to repay, you can consider EMIs for transactions requiring longer repayment periods.
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Note that EMIs including the so called zero cost EMIs are not a free lunch. Store operators often offer these zero cost EMIs on goods that they would be willing to provide discounts on for upfront cash payments. Take a look at 5 benefits of availing credit card EMIs:
1. Repay your unpayable credit dues at lower interest costs
"Non-payment of credit card bills by the due date attracts hefty finance charges of 23-49% p.a. based on the credit card used. Additionally, failure to repay the minimum amount due attracts late payment charges of up to ₹1,300 per billing cycle based on the bill amount and credit card issuer," said Sahil Arora, Director, Paisabazaar.com
Moreover, not clearing the bill amount also leads to revocation of the interest-free period on the fresh credit card transactions until full outstanding dues are repaid. Hence, continued failure to repay the entire credit card bill by the due date can land you in a potential debt trap.
Arora said, "One of the best ways to avoid such debt traps is to convert your entire credit card outstanding or a part of it into EMIs. Interest cost charged for EMI conversions generally ranges from 11-24% p.a. based on the card issuer and their risk evaluation of the card users’ credit profile."
2. Finances your consumption without compromising liquidity
The repayment tenure of credit card EMI conversion can range between 3-60 months basis the EMI type opted for; card users can easily repay their dues in smaller tranches at a lower cost depending on their repayment capacity. Thus, those facing fund shortages for their consumption needs can purchase the goods and/or services through credit cards and then convert those transactions individually or the entire bill or a part of it into EMIs without impacting their liquidity.
3. Access to merchant EMI offers
Many stores, merchants and e-commerce portals offer EMI facility on their goods and services bought through credit cards. Such EMI options are offered depending on the tie-ups between the credit card issuers and specific manufacturer/merchant.
"While the tenures and interest rates are set depending on the tie-ups, merchant EMI interest rates offer may beat those levied on EMI conversions. Thus, those credit card users planning to make big-ticket purchases should check with the e-commerce portals and stores regarding the availability of merchant EMI offers on those goods. No fresh documentation is required to avail such offers. Cardholders just need to inform the stores whether they want to opt for the EMI offer. On the eCommerce portal, users need to select the required option to avail the EMI offer," said Arora.
4. Access to no-cost EMI schemes
No-cost EMI scheme is a variant of merchant EMI, wherein the interest cost of the EMI is borne by the merchant or manufacturer and the buyer of the product or service is required to only pay back the purchase cost in the form of EMI. However, the card user has to bear the Good and Services Tax (GST) levied on the interest component. "Note that some card issuers also offer additional discounts or cashback to their credit card users on making purchases through no-cost EMIs, based on their tie-ups with the merchant/manufacturer," Arora said.
5. Access to instant credit to meet financial emergencies and shortfalls
Credit card users with a good repayment track record and credit profile are also offered loans against credit cards. These loans are ‘pre-approved loans’ usually sanctioned against the cardholders' credit limit. The credit limit is blocked temporarily up to the extent of the loan amount sanctioned and is released as and when you repay your loan.
Arora said, "The tenures of loans against credit cards generally range between 6 and 60 months and their repayments are made in the form of EMIs. While the rate of interest for such loans varies basis the card issuer and credit card holder’s profile, they generally are a notch higher than personal loans’ interest rate offered by the same issuer to cardholders with the same credit profile."
Such type of loans generally has one of the fastest processing and disbursal among all loan types and the interest gets charged as soon as the loan amount gets deposited in the bank account. Therefore, one must carefully opt for such option.
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